Question 1

What is arbitrage? What are its potential uses and/or abuses? How are potential abuses regulated?

Accepted Answer

Arbitrage refers to the issuance of debt

Question 2

Sister City was notified by the state that it has been awarded a $5 million grant to aid in the construction of a senior citizens center. At the time of the notification what is the appropriate entry in the capital projects fund? Assume that the city has met all eligibility requirements and maintains its books and records in a manner to facilitate the preparation of fund financial statements.

Accepted Answer

A)  No entry at the time of the notification. 
B)  Debit Grants receivable $5 million; Credit Revenue $5 million. 
C)  Debit Grants receivable $5 million; Credit Deferred inflow of resources $5 million. 
D)  Debit Grants receivable $5 million; credit Other financing sources-nonreciprocal transfer-in $5 million. 
A)  No entry at the time of the notification. 
B)  Debit Grants receivable $5 million; Credit Revenue $5 million. 
C)  Debit Grants receivable $5 million; Credit Deferred inflow of resources $5 million. 
D)  Debit Grants receivable $5 million; credit Other financing sources-nonreciprocal transfer-in $5 million.

Question 3

Proceeds of debt issued to finance a capital project should be reported in a capital projects fund as a liability until the project is completed.

Accepted Answer

A) True 
 B)False

Question 4

How should Lewis County account for the amount transferred on June 20 if the county maintains its books and records in a manner that facilitates the preparation of fund financial statements?

Accepted Answer

A)  Debit Cash with fiscal agent and expenditures; Credit Cash and interest payable. 
B)  Debit Cash with fiscal agent and interest expense; Credit Cash and interest payable. 
C)  Debit Expenditures; Credit Cash. 
D)  Debit Cash with fiscal agent; Credit Cash. 
A)  Debit Cash with fiscal agent and expenditures; Credit Cash and interest payable. 
B)  Debit Cash with fiscal agent and interest expense; Credit Cash and interest payable. 
C)  Debit Expenditures; Credit Cash. 
D)  Debit Cash with fiscal agent; Credit Cash.

Question 5

Cascade County issued $1 million of 6 percent term bonds at 101. These bonds will be used to finance the construction of highways. The entry in the debt service fund to record the receipt of cash should be

Accepted Answer

A)  Debit Cash $10,000; Credit Revenue, $10,000. 
B)  Debit Cash $10,000; Credit Other financing sources-nonreciprocal transfer-in, $10,000. 
C)  Debit Cash $1,010,000; Credit Bonds payable $1,000,000 and premium on bonds $10,000. 
D)  Debit Cash $1,010,000; Credit Other financing sources-nonreciprocal transfer-in $1,010,000. 
A)  Debit Cash $10,000; Credit Revenue, $10,000. 
B)  Debit Cash $10,000; Credit Other financing sources-nonreciprocal transfer-in, $10,000. 
C)  Debit Cash $1,010,000; Credit Bonds payable $1,000,000 and premium on bonds $10,000. 
D)  Debit Cash $1,010,000; Credit Other financing sources-nonreciprocal transfer-in $1,010,000.

Question 6

Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.

Accepted Answer

A) True 
 B)False

Question 7

In which fund type would a government's capital projects fund be found?

Accepted Answer

A)  Governmental fund type. 
B)  Proprietary fund type. 
C)  Fiduciary fund type. 
D)  Governmental activities. 
A)  Governmental fund type. 
B)  Proprietary fund type. 
C)  Fiduciary fund type. 
D)  Governmental activities.

Question 8

Harbor City issued 6 percent tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7 percent. After paying the interest on the tax-exempt bonds, the city cleared 1 percent. This is an example of

Accepted Answer

A)  An illegal act. 
B)  Poor fiscal management. 
C)  Arbitrage. 
D)  Debt refunding. 
A)  An illegal act. 
B)  Poor fiscal management. 
C)  Arbitrage. 
D)  Debt refunding.

Question 9

In its governmental fund financial statements, a government should recognize revenue from special assessments

Accepted Answer

A)  In the year it imposes a special assessment. 
B)  In the year an assessment is due. 
C)  In the year an assessment is paid. 
D)  In the year an assessment becomes available for expenditure. 
A)  In the year it imposes a special assessment. 
B)  In the year an assessment is due. 
C)  In the year an assessment is paid. 
D)  In the year an assessment becomes available for expenditure.

Question 10

The proceeds of the bond issue should be recorded in which fund of the City of Arlington?

Accepted Answer

A)  Agency fund. 
B)  Special assessment fund. 
C)  Capital projects fund. 
D)  Debt service fund. 
A)  Agency fund. 
B)  Special assessment fund. 
C)  Capital projects fund. 
D)  Debt service fund.

Question 11

What entry should be made on July 1 related to the interest payment?

Accepted Answer

A)  No entry required. 
B)  Debit Interest payable; Credit Cash. 
C)  Debit Interest payable; Credit Cash with fiscal agent. 
D)  Debit Expenditure; Credit Cash with fiscal agent. 
A)  No entry required. 
B)  Debit Interest payable; Credit Cash. 
C)  Debit Interest payable; Credit Cash with fiscal agent. 
D)  Debit Expenditure; Credit Cash with fiscal agent.

Question 12

In the debt service fund

Accepted Answer

A)  Debit Cash $100.000; Credit Revenues $100,000; no other entries required. 
B)  Debit Cash $100,000; Credit Other financing sources-nonreciprocal transfer-in $100,000; No other entries required. 
C)  Debit Other financing sources-nonreciprocal transfer-out $100,000; credit Cash $100,000. 
D)  No entry in the debt service fund. 
A)  Debit Cash $100.000; Credit Revenues $100,000; no other entries required. 
B)  Debit Cash $100,000; Credit Other financing sources-nonreciprocal transfer-in $100,000; No other entries required. 
C)  Debit Other financing sources-nonreciprocal transfer-out $100,000; credit Cash $100,000. 
D)  No entry in the debt service fund.

Question 13

The voters of Salinas City authorized the construction of a new north-south expressway for a total cost of no more that $90 million. The voters also approved the issuance of $60 million of 5 percent general obligation bonds. The balance of the necessary funds will come from the following sources: $20 million from a federal grant and $10 million from a state grant. The city controls expenditures in capital project funds through project management. The city does not formally incorporate budgetary entries in the capital projects fund but it does use encumbrance accounting for control purposes.
REQUIRED: Assume that the city maintains its books and records in a manner that facilitates the preparation of the fund financial statements. Prepare journal entries in the capital projects fund, for the following transactions. The city
(a) Issues $60 million of 5 percent general obligation bonds at 101.
(b) Transfers the premium to the appropriate fund.
(c) Incurs bid-related expenditures of $1,000.
(d) Signs a contract with the lowest competent bidder for $58 million.
(e) Receives notice from the state that the grant has been approved and the proceeds will be forwarded to the city in the state's current fiscal year.
(f) Receives the federal grant in full.
(g) Pays a progress billing from the contractor for $12 million.

Accepted Answer

@#IMG-DLM& [NOTE: Students may make two

Question 14

How should governments report their capital projects and debt service activities in their government-wide financial statements?

Accepted Answer

In their government-wide statements, gov

Question 15

In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

Accepted Answer

A) True 
 B)False

Question 16

Clark City has the following balances in the accounts of its capital projects fund at year-end before closing entries. All accounts have normal balances. All amounts are in millions of dollars.
REQUIRED:
(a) Prepare an operating statement for the capital projects fund.
(b) Prepare a balance sheet for the capital projects fund.

Accepted Answer

The answer of Clark City has the following balances in...

Question 17

Which of the following is not characteristics of a capital projects?

Accepted Answer

A)  Involves long-lived assets 
B)  Usually requires long-range planning and extensive financing 
C)  Usually has a year-to-year focus 
D)  None of the above 
A)  Involves long-lived assets 
B)  Usually requires long-range planning and extensive financing 
C)  Usually has a year-to-year focus 
D)  None of the above

Question 18

The citizens of a defined geographical area of Eagle City authorized a special assessment to be levied on their properties to finance the reconstruction of the sewer system infrastructure that serves the area. The city will solicit bids, oversee reconstruction, issue the debt in the name of the city, and service the debt. The city is NOT obligated in any manner for the debt but will collect the special assessments and make principal and interest payments to the bondholders. Discuss the appropriate accounting for the construction phase and the debt service phase of this project. Justify the required accounting and financial reporting for these two phases of this project.

Accepted Answer

Debt service activities of special asses

Question 19

The capital projects fund of a government is accounted for using which of the following bases of accounting?

Accepted Answer

A)  Budgetary basis. 
B)  Cash basis. 
C)  Modified accrual basis. 
D)  Accrual basis. 
A)  Budgetary basis. 
B)  Cash basis. 
C)  Modified accrual basis. 
D)  Accrual basis.

Question 20

Sugar City issued $2 million of bonds to fund the construction of a new city office building. The bonds have a stated rate of interest of 5 percent and were sold at 101. Which of the following entries should be made in the capital projects fund to record this event?

Accepted Answer

A)  Debit Cash $2.02 million; Credit Bonds payable $2 million and Premium on bonds payable $0.02 million. 
B)  Debit Cash $2.02 million; Credit Bonds payable $2 million and Other financing sources $0.02 million. 
C)  Debit Cash $2.02 million; Credit Other financing sources $2.02 million. 
D)  Debit Cash $2.02 million; Credit Other financing sources $2 million and Revenue $0.02 million. 
A)  Debit Cash $2.02 million; Credit Bonds payable $2 million and Premium on bonds payable $0.02 million. 
B)  Debit Cash $2.02 million; Credit Bonds payable $2 million and Other financing sources $0.02 million. 
C)  Debit Cash $2.02 million; Credit Other financing sources $2.02 million. 
D)  Debit Cash $2.02 million; Credit Other financing sources $2 million and Revenue $0.02 million.

What is arbitrage? What are its potential uses and/or abuses? How are potential abuses regulated?

Proceeds of debt issued to finance a capital project should be reported in a capital projects fund as a liability until the project is completed.

How should Lewis County account for the amount transferred on June 20 if the county maintains its books and records in a manner that facilitates the preparation of fund financial statements?

Cascade County issued $1 million of 6 percent term bonds at 101. These bonds will be used to finance the construction of highways. The entry in the debt service fund to record the receipt of cash should be

Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.

In which fund type would a government's capital projects fund be found?

Harbor City issued 6 percent tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7 percent. After paying the interest on the tax-exempt bonds, the city cleared 1 percent. This is an example of

In its governmental fund financial statements, a government should recognize revenue from special assessments

The proceeds of the bond issue should be recorded in which fund of the City of Arlington?

What entry should be made on July 1 related to the interest payment?

In the debt service fund

How should governments report their capital projects and debt service activities in their government-wide financial statements?

In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

Which of the following is not characteristics of a capital projects?

The capital projects fund of a government is accounted for using which of the following bases of accounting?

Sugar City issued $2 million of bonds to fund the construction of a new city office building. The bonds have a stated rate of interest of 5 percent and were sold at 101. Which of the following entries should be made in the capital projects fund to record this event?

The Government and Not-For-Profit Environment

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Business-Type Activities

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health-Care Providers

Auditing Governments and Not-For-Profit Organizations

Federal Government Accounting

Filters

Exam 6: Accounting for Capital Projects and Debt Service

What is arbitrage? What are its potential uses and/or abuses? How are potential abuses regulated?

Proceeds of debt issued to finance a capital project should be reported in a capital projects fund as a liability until the project is completed.

How should Lewis County account for the amount transferred on June 20 if the county maintains its books and records in a manner that facilitates the preparation of fund financial statements?

Cascade County issued $1 million of 6 percent term bonds at 101. These bonds will be used to finance the construction of highways. The entry in the debt service fund to record the receipt of cash should be

Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.

In which fund type would a government's capital projects fund be found?

Harbor City issued 6 percent tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7 percent. After paying the interest on the tax-exempt bonds, the city cleared 1 percent. This is an example of

In its governmental fund financial statements, a government should recognize revenue from special assessments

The proceeds of the bond issue should be recorded in which fund of the City of Arlington?

What entry should be made on July 1 related to the interest payment?

In the debt service fund

How should governments report their capital projects and debt service activities in their government-wide financial statements?

In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

Which of the following is not characteristics of a capital projects?

The capital projects fund of a government is accounted for using which of the following bases of accounting?

Sugar City issued $2 million of bonds to fund the construction of a new city office building. The bonds have a stated rate of interest of 5 percent and were sold at 101. Which of the following entries should be made in the capital projects fund to record this event?

The Government and Not-For-Profit Environment

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Business-Type Activities

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health-Care Providers

Auditing Governments and Not-For-Profit Organizations

Federal Government Accounting

Filters